Cablegate: Bilateral with Vice Premier Li Keqiang - Cooperation And

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SUBJECT: BILATERAL WITH VICE PREMIER LI KEQIANG - COOPERATION AND
CHALLENGES

SUMMARY
-------
1. (SBU) Commerce Secretary Locke, Energy Secretary Chu, U.S. Trade
Representative Kirk and U.S. Trade Development Administrator Zak met
with Vice Premier Li Keqiang on November 18, 2009 at the Great Hall
of the People, to discuss a broad range of bilateral issues
including energy cooperation and economic challenges. The U.S. side
congratulated China on progress to date on energy efficiency
improvements and a range of other issues, stressing U.S. willingness
and desire to continue strengthening cooperation. Vice Premier Li
lauded the bilateral cooperation and highlighted many areas both
sides agree must be addressed together such as climate change and
clean energy. Li discussed how meeting these challenges is not only
a matter of international responsibilities but is important for
citizens in both countries. Symbolizing and strengthening the
bilateral clean energy relationship, Li and other Chinese officials,
and Locke, Chu, and Zak witnessed and in some cases signed eight
agreements at the conclusion of the bilateral meetings. END
SUMMARY.

2. (SBU) Vice Premier Li opened the meeting, noting that he had met
Secretary Locke and Chu on their previous trips to China, and had
also met Ambassador Kirk and Director Zak as well. He described the
gathering as one of old and new friends, welcoming everyone on
behalf of the Chinese people and government. He commented that the
frequency of high-level meetings was an indication of the broad
consensus on global energy and trade issues, a development Vice
Premier Li found very gratifying. Referring to the meeting between
Presidents Obama and Hu earlier in the day, during which the two
leaders reached broad consensus on the importance of the bilateral
relationship, the Vice Premier characterized the discussion as
constructive, positive and comprehensive. Vice Premier Li pointed
out that the Presidents issued a joint statement defining concrete
actions to further the partnership between our two countries, and
expressed his hope these actions will help further expand our
relationship.

U.S. PRAISES PROGRESS, HIGHLIGHTS CHALLENGES
--------------------------------------------
3. (SBU) Commerce Secretary Gary Locke thanked Vice Premier Li for
his hospitality, and explained that the United States and China have
a long history of cooperation that dates back several hundred years.
He noted the example of Chinese labor that assisted in completing
the trans-continental railroad, also noting that rail technology,
both high-speed and traditional, is an essential part of combating
global warming. Secretary Locke also mentioned the long history of
partnership between our two countries, noting collaboration on
fighting imperialism and nuclear non-proliferation. Secretary Locke
sited the common challenges that face both countries today,
including providing health care and combating climate change. He
suggested that both the United States and China have different areas
of expertise that could benefit each other in solving these

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problems. Secretary Locke pointed to the signings scheduled to
follow this meeting (eight signings, mostly focused on energy
cooperation) as an indication of the cooperation and joint
commitment to resolve common issues.

4. (SBU) Secretary Locke also highlighted the challenge that China
faces in providing healthcare to its citizens, and mentioned that
the United States is working to resolve similar issues at home. He
hoped that China would be open to learning from the mistakes and
successes of the United States in this area, and said that U.S.
technology and business practices, including hospital systems, could
be very helpful in this regard. Secretary Locke then ceded the
floor to other members of the President's Cabinet for their
comments.

5. (SBU) Energy Secretary Steven Chu noted that the energy-related
agreements between the United States and China represented a big
step forward, and demonstrated a shared commitment to combat
climate-related problems. Secretary Chu was very encouraged by
China's new commitment to carbon-intensity targets, and feels this
represents good news for the world. Secretary Chu pointed out that
China has already demonstrated an impressive ability to meet
ambitious targets for reducing the energy used per unit of GDP, and
hoped the country would be equally committed to reaching
carbon-intensity targets as well. He cited China's interest in
renewable energy and increasing political attention to this area as
positive developments. Speaking to Minister Wan (Ministry of Science
and Technology), Secretary Chu said that the Clean Energy Research
Center (CERC) will enable the United States and China to work
together to co-develop, co-own and deploy new technologies that can
help solve the world's energy/environment problem.

6. (SBU) U.S. Trade Representative Kirk drew attention to an earlier
conversation between Presidents Obama and Hu about the challenge
China faces with integrating 600 million rural residents into urban
areas. Ambassador Kirk said that the financial crisis had
demonstrated to Presidents Obama and Hu that our two countries'
economies are intertwined and required rebalancing. He stated that
President Obama had made clear that the United States has nothing to
fear from an expanding China, and that likewise, China should not
fear as the United States seeks to address its trade imbalance.
Ambassador Kirk noted that the Chinese are competitive in
manufacturing, stating that this fits well with U.S. strength in
innovation, technology and technical expertise. He said it is
important to maintain openness in this context, allowing each
partner to benefit from the expertise of the other.

7. (SBU) Ambassador Kirk praised the very successful round of JCCT
talks (Joint Commission for Commerce and Trade), recently concluded
in Hangzhou, and thanked the commitment of his Chinese counterparts
for making that a priority. He expressed his hope to continue
working together to solve remaining issues, including the Government

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Procurement Program.

8. (SBU) Trade Development Administration Director Leocadia Zak
noted that the private sector is an important partner in addressing
the policy issues that were raised during this meeting, and held up
the Energy Cooperation Program (ECP) as an important example of
public-private partnerships to address common concerns. She noted
the program's early progress, reporting that despite its very recent
start, the ECP had already recruited 23 corporate members. In
coordination with the National Development and Reform Commission,
National Energy Administration and Vice Minister Ma Xiuhong from the
Ministry of Commerce, the ECP has defined two initial-phase
activities: a low-carbon leadership program and a technology
exchange.

LI PRAISES COOPERATION, CALLS FOR MORE
--------------------------------------
9. (SBU) Vice Premier Li agreed with Commerce Secretary Locke that
the cooperation between the United States and China did extend back
many years, referencing their joint fight against aggression during
World War II. Today, the process of globalization is generating new
opportunities for collaboration, particularly in the area of trade.
Vice Premier Li explained that China responded to the global
financial crisis by seeking to increase consumer demand and improve
China's health care system. He mentioned that efforts were already
underway to boost domestic consumption and build a social safety
net, explaining that the challenge was to transform economic
development and generate balanced growth.

10. (SBU) Countries must stand against trade and investment
restrictions, said the Vice Premier, noting that China is Asia's
largest market for foreign imports. He welcomed inflows of
competitive U.S. products, especially in the area of advanced
technology, which he noted also included medical products. The Vice
Premier further agreed that climate change and clean energy were
important areas of collaboration, and pointed to the three
government-to-government signings immediately following this meeting
as evidence of the broad scope for cooperation. He explained that
solving the energy and environment problems were not just part of
China's international responsibilities as a large country, but also
essential for its internal commitments to its people as well.

11. (SBU) Vice Premier Li noted that given its large population and
rapid growth, sustainable development is a necessary policy goal for
China, and he singled out energy as the most important bottle neck.
He noted that China has the largest energy generation capacity in
the world and the largest new capacity under construction in the
world. Vice Premier Li highlighted the importance of energy
efficiency in ensuring sustainable growth, and noted that China is
deploying U.S. technology, including Westinghouse's AP1000, in this
effort. He expressed a desire for more forward looking research
projects in the area of renewable energy technologies, including

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fuel-cell electric cars, and CO2 capture/sequestration procedures.

12. (SBU) Vice Premier Li said that the foundation of cooperation on
energy and trade issues involved working closely with "enterprises"
(companies), and said that the inherent vitality of Chinese
enterprises will be unleashed in this effort. He thought that
cooperation between the private sector in the United States and
China would be important, and described the role of government as
facilitating an enabling environment for cooperation between private
sector players.

13. (SBU) Vice Premier Li noted that the context created by the
international financial crisis and world recovery underscored a need
for sustained and balanced growth. This round of meetings was
helpful in creating a better mutual understanding, and an important
opportunity to clear up differences. The actions outlined in the
signings provided follow through on the commitments made by
Presidents Obama and Hu.

14. (SBU) Secretary Locke expressed appreciation for the opportunity
to work together with his Chinese counterparts, exchanging
technology and expertise, to solve common problems. He explained
that it was our moral responsibility to address environmental
issues, and hoped that 100 years from now the history books would
say the United States and China worked together to solve climate
change.

15. (SBU) Vice Premier Li concluded by saying that the United States
and China are the world's largest developed and developing country
respectively, and have a shared interest in addressing this issue.
He explained that globalization provides a new opening to work
together, but hoped the history books would comment how all
countries in the world had worked together to solve the
environmental problem.

SIGNINGS
--------
16. (U) Presided over by Vice Premier Li, and witnessed or signed by
Secretary Locke, Secretary Chu, Director Zak, and DOE Assistant
Secretary David Sandalow, eight signings occurred at the conclusion
of the bilateral meeting.

(U) Secretary Locke, Secretary Chu, and Director Zak signed an MOU
on the U.S.-China Energy Cooperation Program, which establishes the
operating framework of this public-private partnership that TDA and
MOFCOM agreed to establish during the JCCT to develop clean energy
projects in China, and which now includes 23 founding U.S.
companies.

(U) Assistant Secretary Sandalow signed, with Vice Administrator of
NEA Liu Qi, a Memorandum of Cooperation establishing a Renewable
Energy Partnership.

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(U) Ambassador Jon Huntsman (in absentia, but signed previously)
signed with Liu Qi an agreement pledging cooperation on shale gas
development. This document is an Annex to the MOU to Enhance
Cooperation on Climate Change, Energy, and the Environment signed
during the SNED in July.

(U) Director Zak signed an MOU on Support of an Integrated Gas
Combined Cycle (IGCC) Feasibility Study with CEPCC (a Chinese power
engineering firm). Each plant is estimated to be worth over $100
million in U.S. exports.

(U) GE Energy and Shenhua Group signed an MOU on Cleaner Coal
cooperation that will establish a framework for the formation of a
joint venture company between GE Energy and Shenhua Group to advance
"cleaner coal" technology solutions.

(U) Peabody and Huaneng Group signed a contract finalizing
investment obligations in the GreenGen IGCC-CCS plant that will
sequester major volumes of carbon dioxide beginning in about five
years.

(U) AES Corp. and a Chongqing-based energy company signed a Joint
Venture contract to commercially utilize coalbed methane from mines
in Sichuan, abating some 4 million tons of CO2-equivalent emissions
annually.

(U) First Solar Corp. and the Ordos (Inner Mongolia) city Mayor
signed a Cooperation Framework Agreement governing First Solar's
investments, and Ordos' obligations to facilitate, what may become
the world's largest solar power farm near Ordos.

(U) Vice Premier Li and the U.S. VIPs also recognized the recent
signing of the Tsinghua University-Massachusetts Institute of
Technology-Cambridge University Low Carbon Energy Alliance as a
major contribution by academia to the acceleration of clean energy
technology development and deployment and a lower-carbon world.

17. (U) The U.S. delegation consisted of:
Gary Locke, Secretary of Commerce
Steven Chu, Secretary of Energy
Ambassador Ron Kirk, U.S. Trade Representative
Leocadia Zak, Director, Trade Development Administration
Ambassador Demetrios Marantis, Deputy U.S. Trade Representative
David Sandalow, Assistant Secretary, Department of Energy
Ellen Moran, Chief of Staff, Department of Commerce
Rod O'Connor, Chief of Staff, Department of Energy
Julianna Smoot, Chief of Staff, U.S. Trade Representative
William Zarit, Commercial Minister-Counselor, U.S. Embassy Beijing
Marty Schoenbauer, Energy Attach, U.S. Embassy Beijing
Landon Loomis, Second Secretary, U.S. Embassy Beijing

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18. (U) The Chinese delegation consisted of:
Li Keqiang, Vice Premier of the State Council
Wan Gang, Minister of Science and Technology
Ning Jizhe, Vice Minister of Research Office of the State Council
Zhang Xiaoqiang, Vice Chairman National Development & Reform
Commission
He Yafei, Vice Minister of Ministry of Foreign Affairs
Ma Xiuhong, Vice Minister of Commerce
Liu Qi, Deputy Head of National Energy Administration

HUNTSMAN

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